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REPORT ON EXAMINATION
OF
GENWORTH LIFE INSURANCE COMPANY
AS OF
DECEMBER 31, 2014
i
Table of Contents
SALUTATION ....................................................................................................................................... 1
SCOPE OF EXAMINATION................................................................................................................. 2
SUMMARY OF SIGNIFICANT FINDINGS ........................................................................................ 3
COMPANY HISTORY .......................................................................................................................... 3
Capitalization .......................................................................................................................................... 4
Dividends ................................................................................................................................................ 5
MANAGEMENT AND CONTROL ...................................................................................................... 6
Stockholder ............................................................................................................................................. 6
Board of Directors................................................................................................................................... 7
Committees ............................................................................................................................................. 8
Officers ................................................................................................................................................. 10
Articles of Incorporation and bylaws .................................................................................................... 11
Corporate Records ................................................................................................................................ 11
Holding Company System .................................................................................................................... 11
Affiliated Agreements ........................................................................................................................... 14
TERRITORY AND PLAN OF OPERATION ..................................................................................... 18
Territory ................................................................................................................................................ 18
Plan of Operation .................................................................................................................................. 18
REINSURANCE................................................................................................................................... 23
FINANCIAL STATEMENTS .............................................................................................................. 28
Statement of Assets, Liabilities and Surplus ......................................................................................... 29
Reconciliation of Capital and Surplus .................................................................................................. 32
Analysis of Changes in the Financial Statements Resulting from Examination .................................. 32
NOTES TO FINANCIAL STATEMENTS .......................................................................................... 32
SUBSEQUENT EVENTS .................................................................................................................... 36
SUMMARY OF RECOMMENDATIONS .......................................................................................... 36
CONCLUSION ..................................................................................................................................... 37
SALUTATION
May 31, 2016 Honorable Karen Weldin Stewart, CIR-ML Delaware Insurance Commissioner Delaware Department of Insurance Rodney Building 841 Silver Lake Blvd. Dover, Delaware 19904 Dear Commissioner; In compliance with instructions and pursuant to statutory provisions contained in Certificate
of Authority No. 15.014, dated February 3, 2015, an examination has been made of the affairs,
financial condition and management of
GENWORTH LIFE INSURANCE COMPANY
hereinafter referred to as the “Company” or “GLIC” and incorporated under the laws of the State of
Delaware as a stock company. The statutory home office is located at 2711 Centerville Road, Suite
400, Wilmington, Delaware. The examination was conducted at the main administrative office of the
Company, located at 6604 W. Broad Street, Richmond, Virginia, 23230.
This examination was conducted concurrently as part of the coordinated examination of the
Genworth Group, which consisted of GLIC, Genworth Life and Annuity Insurance Company
(“GLAIC”), Jamestown Life Insurance Company (“Jamestown”), and Genworth Life Insurance
Company of New York (“GLICNY”). The Commonwealth of Virginia was the assigned lead state by
the National Association of Insurance Commissioners (NAIC). Separate reports of examination were
filed for each company within the Group. The report for this examination thereon is respectfully
submitted.
Genworth Life Insurance Company
2
SCOPE OF EXAMINATION
We have participated in the coordinated financial examination of Genworth Life
Insurance Company, a multi-state insurer. The previous examination was performed as of
December 31, 2009. This examination covered the period of January 1, 2010 through December
31, 2014. Transactions subsequent to the examination were reviewed where deemed necessary.
This examination was conducted in accordance with the National Association of
Insurance Commissioners (NAIC) Financial Condition Examiners Handbook (Handbook) and
generally accepted statutory insurance examination standards consistent with the Insurance Laws
and Regulations of the State of Delaware.
The Handbook requires that we plan and perform the examination to evaluate the
financial condition, assess corporate governance, identify current and prospective risks of the
Company and evaluate system controls and procedures used to mitigate those risks. An
examination also includes identifying and evaluating significant risks that could cause an
insurer’s surplus to be materially misstated both currently and prospectively
All accounts and activities of the Company were considered in accordance with the risk
focused examination process. This may include assessing significant estimates made by
management and evaluating management’s compliance with Statutory Accounting Principles.
The examination does not attest to the fair presentation of the financial statements included
herein. If, during the course of the examination an adjustment is identified, the impact of such
adjustment will be documented separately following the Company’s financial statements.
This examination report includes significant findings of fact, pursuant to the General
Corporation Law of the State of Delaware as required by 18 Del. C. §321, along with general
information about the insurer and its financial condition. There may be other items identified
Genworth Life Insurance Company
3
during the examination that, due to their nature, are not included within the examination report
but separately communicated to other regulators and/or the Company.
SUMMARY OF SIGNIFICANT FINDINGS
There were no significant findings or material adjustments in the Company’s financial
statements.
COMPANY HISTORY
Pursuant to a Stock Purchase Agreement effective April 3, 1993, General Electric Capital
Corporation (“GECC”), a subsidiary of General Electric Company (“GE”), acquired 100% of the
capital stock of United Pacific Life Insurance Company and five of its seven wholly owned
subsidiaries from Reliance Insurance Company and its parent, Reliance Group Holdings, Inc.
The stock of the Company was assigned to GNA Corporation, subsequently named Genworth
North America Corporation (“GNA”), an insurance holding company subsidiary of GECC.
Pursuant to its Amended and Restated Certificate of Incorporation effective April 1, 1994, the
name of the Company was changed to General Electric Capital Assurance Company. The
Company became a controlled insurer of Genworth Financial, Inc., now known as Genworth
Holdings Inc. (“Genworth Holdings”) in May, 2004, immediately prior to the initial public
offering of Genworth Holdings’ common stock, when its direct parent, GNA, was transferred to
Genworth Holdings by GE Financial Assurance Holdings, Inc. (“GEFA”). Pursuant to its
Amended and Restated Certificate of Incorporation effective January 1, 2006, the name of the
Company was changed to Genworth Life Insurance Company. In April, 2013, Holdings changed
its name to Genworth Holdings, Inc. and a newly formed Genworth Financial, Inc. (Genworth)
became the ultimate parent of the Company following an internal reorganization.
Genworth Life Insurance Company
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Capitalization
The Company has 6,200,000 shares of common stock authorized, of which 4,561,258
shares are issued and outstanding, at $1 per share par value, for a total outstanding of $4,561,258
at December 31, 2014. The Company also has 1,000,000 shares of preferred stock authorized, of
which 300,000 shares are issued and outstanding, at $1 per share par value, for a total
outstanding of $300,000.
At December 31, 2014, all outstanding shares of the Company’s common stock were
owned by GNA, which is a wholly owned subsidiary of Genworth Financial, Inc.
As of December 31, 2014, the Company reported gross paid in and contributed surplus of
$3.1 billion. During the examination period, the Company received approximately $6.1 million
and $25 million in gross paid in and contributed surplus from its parent, GNA, for the years
ended 2012 and 2014, respectively. The 2012 contribution was in the form of a 100%
membership interest in National Eldercare Referral Systems, LLC (“CareScout”).
During the period under examination, the Company received the following capital
contributions from the Parent:
Year Contribution2010 -$ 2011 -$ 2012 6,130,417$ 2013 -$ 2014 25,000,000$
The Company’s parent, GNA, made a capital contribution on February 19, 2015 to the
Company, which was prior to the filing of the Company’s 2014 Statutory Annual Statement.
The Delaware Department of Insurance granted approval for the cash contribution to be treated
as a Type 1 Subsequent Event in accordance with NAIC Accounting Practices and Procedures
Genworth Life Insurance Company
5
Manual, SSAP No. 9. As such, the Company recorded the capital contribution as an admitted
asset in its 2014 Statutory Annual Statement in accordance with SSAP No. 72.
The 2014 capital contribution was less than 3% of the Company’s admitted assets and
therefore, did not require the prior approval of the Delaware Department of Insurance pursuant to
18 Del. C. §5005 “Standards and management of an insurer within an insurance holding
company system”.
Dividends
The Company paid stockholder dividends as follows:
Year Preferred Dividends Common Dividends2010 15,000,000 02011 15,000,000 02012 15,000,000 175,000,0002013 15,000,000 175,000,0002014 15,000,000 0
75,000,000 350,000,000
In accordance with 18 Del. C. §5005(b) “Dividends and other distributions”, prior
approval from the Delaware Department of Insurance was obtained before payment of
each extraordinary dividend. The Company paid extraordinary dividends in 2011 to
Genworth Mortgage Insurance Corporation of North Carolina (“GMIC NC”) in the
amounts of $0.9 million and $0.9 million, totaling $1.8 million; and to Genworth
Mortgage Insurance Corporation (“GMIC”) in the amounts of $6.6 million and $6.6
million, totaling $13.2 million. The Company also paid extraordinary dividends in 2012
to GNA in the amounts of $100 million, $50 million and $25 million, totaling $175
million; to GMIC NC in the amounts of $0.9 million and $0.9 million, totaling $1.8
million; and to GMIC in the amounts of $6.6 million and $6.6 million, totaling $13.2
million.
Genworth Life Insurance Company
6
In accordance with 18 Del. C. §5004(e) “Reporting of dividends to shareholders”, prior
approval from the Delaware Department of Insurance was obtained before payment of each
ordinary dividend. The Company paid ordinary dividends during the examination period in the
amounts of $15 million, $190 million and $15 million for the years ended 2010, 2013 and 2014,
respectively. The dividends were paid in the form of cash.
MANAGEMENT AND CONTROL
Stockholder
Article I of the Company’s amended bylaws, states that annual meetings of the
stockholders shall be held on such date as may from time to time be determined by the Board of
Directors or at such time or place within or without the State of Delaware as shall be designated
by the Board of Directors, as stated in the notice of such meeting. At each annual meeting, the
stockholders entitled to vote shall elect a Board of Directors and they may transact such other
business as may be brought before the meeting. Special meetings of stockholders for any
purpose may be called by the Chairman of the Board or the President or his designee, or on the
call of stockholders holding together at least thirty percent of the capital stock, such call in any
case is to be in writing and addressed to the Secretary. The business transacted at any special
meeting shall be limited to the purpose or purposes stated in the meeting notice. The holders of a
majority of all the stocks of capital stock of the Company, present in person or represented by
proxy, shall constitute a quorum of the stockholders for all purposes. At each meeting of the
stockholders, every holder of stock then entitled to vote may vote in person or by proxy, and
shall have one vote for each share of stock registered in his name. Unless otherwise restricted by
the Articles of Incorporation or by statute, any action required or permitted to be taken at any
Genworth Life Insurance Company
7
meeting of the stockholders may be taken without a meeting if all stockholders consent thereto in
writing, and the writing(s) are filed with the minutes of proceedings, for the stockholders. .
Board of Directors
Pursuant to the General Corporation Laws of the State of Delaware, as implemented by
the Company's Articles of Incorporation and bylaws, all corporate powers are exercised by or
under the direction of the Board of Directors. The bylaws, as amended and restated January 1,
2006, provide that the Company’s business and property shall be managed by the Board of
Directors. Subject to restrictions imposed by law, the Articles of Incorporation, or the bylaws,
the Board can exercise all of the powers of the Company.
The Board shall consist of not less than one (1) and no more than five (5) members. The
Board shall be elected at the annual meeting of stockholders and each director shall be elected to
hold office until the next succeeding annual meeting or until his successor is elected and
qualified or until his earlier death, resignation or removal.
The Board of Directors at any regular meeting may declare dividends payable out of the
surplus of the Company. Such dividends may be paid in cash, property, or shares of the
Company.
At December 31, 2014, the members of the Board of Directors together with their
principal business affiliations were as follows:
Name Principal Occupation
Thomas J. McInerney Chairman of the Board of Directors; President and Chief Executive Officer of Genworth Financial, Inc.; President and Chief Executive Officer of the U.S. Life Insurance Division
Daniel J. Sheehan, IV Executive Vice President and Chief
Investment Officer of Genworth Financial, Inc.
Genworth Life Insurance Company
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Leon E. Roday Senior Vice President of Genworth Financial, Inc.
1. Effective January 23, 2015, Leon Roday resigned as a Director of the Company. 2. Effective January 24, 2015, Matthew Keppler was elected as a Director of the Company.
The minutes of the meetings of the stockholders and Board of Directors, which were held
during the period of examination, were read and noted. Attendance at meetings, election of
directors and officers, and approval of investment transactions were also noted.
Committees
Article III of the amended bylaws states that the Board of Directors may, by one or more
resolutions passed by a majority of the whole Board, designate from among its members one or
more committees, to the extent provided in such resolutions and not prohibited by statute, shall
have and may exercise between meeting of the Board of Directors, the authority of the Board
designated by said resolution, provided that the Board of Directors shall not have authority to
establish an Executive Committee without the written consent of all stockholders. In addition,
the Board, by resolutions passed by a majority of the whole Board, may designate an Investment
Committee and other standing committees. Said committees shall have and exercise such
powers, not inconsistent with law or the bylaws.
Article III of the amended bylaws also states that the Board of Directors or its Executive
Committee acting on its behalf, by resolution passed by a majority of the whole Board, may
appoint committees of officers, agents or employees of the Company. Each such committee
shall have and exercise such powers, not inconsistent with law or the bylaws.
On April 1, 2013, Genworth re-designated the Genworth Audit Committee as the Audit
Committee of the Company, consisting of four (4) independent members of the Board. As of
December 31, 2014, the following Genworth directors were members of the Audit Committee:
Genworth Life Insurance Company
9
Name and Location Principal Occupation Christine B. Mead Director of Genworth Financial, Inc. Thomas E. Moloney Director of Genworth Financial, Inc. James A. Parke Director of Genworth Financial, Inc. James S. Riepe Director of Genworth Financial, Inc.
A management Investment Committee, which reports to the Company’s Board of
Directors, was established by the Board on March 23, 2000. The Investment Committee
consisted of six (6) members as of December 31, 2014. The meetings of the Investment
Committee shall be held as deemed necessary, but not less than quarterly. A quorum for the
transaction of business shall be a majority of the members of the Investment Committee and the
agenda for each meeting shall be established in advance of the meeting. Minutes of all
Investment Committee meetings shall be taken and approved at subsequent meetings and shall be
submitted to the Board of Directors on a quarterly basis for ratification. As of July 24, 2014,
date of the Company’s last annual meeting, the following individuals were appointed to serve as
the Genworth Investment Committee:
Name and Location Principal Occupation Lori M. Evangel Executive Vice President and Chief Risk Officer of
Genworth Financial, Inc. Martin P. Klein Executive Vice President and Chief Financial Officer of
Genworth Financial, Inc. Thomas J. McInerney President and Chief Executive Officer of Genworth
Financial, Inc. Leon E. Roday Senior Vice President, General Counsel and Secretary
of Genworth Financial, Inc. Kevin D. Schneider Executive Vice President of Genworth Financial, Inc.;
President and Chief Executive Officer of the Global Mortgage Insurance Division
Genworth Life Insurance Company
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Daniel J. Sheehan, IV Executive Vice President and Chief Investment Officer of Genworth Financial, Inc.
James R. Boyle Executive Vice President and Chief Executive Officer
of the U.S. Life Insurance Division 1. Effective July 29, 2014, James Boyle resigned from his position with the Company. 2. Effective January 23, 2015, Leon Roday resigned from his position with the Company. 3. Effective October 15, 2015, Martin P. Klein resigned from his position with the Company. He was replaced by Kelly Groh, effective October 15, 2015.
Officers Article IV of the amended bylaws states that the Company’s officers shall be elected at
its annual meeting by the Board of Directors and shall consist of a Chairperson of the Board of
Directors, a President, one or more Senior Vice Presidents, one or more Vice Presidents, a
Secretary, and a Treasurer, all of whom shall hold office until the next annual meeting or until a
successor has been duly qualified and elected or until death, resignation, retirement or removal
by the Board of Directors. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
At December 31, 2014, the Company’s principal officers and their respective titles were
as follows:
Name Principal Occupation Thomas J. McInerney Chairperson of the Board, President and Chief Executive Officer Milum D. Livesay Senior Vice President and Chief Financial Officer Ward E. Bobitz Senior Vice President, General Counsel and Secretary John O. Nigh Senior Vice President and Chief Actuary Daniel J. Sheehan, IV Senior Vice President and Chief Investment Officer Jeffrey S. Wright Treasurer Leon E. Roday Senior Vice President Scott J. McKay Senior Vice President and Chief Information Officer Martin P. Klein Senior Vice President Elena K. Edwards Senior Vice President Paul A. Haley Senior Vice President
Aaron C. Ball Vice President, General Counsel and Assistant Secretary of the Long Term Care Division
Michele L. Trampe Assistant Treasurer 1. Effective December 31, 2014, Milum Livesay resigned as Senior Vice President and CFO of the Company. 2. Effective January 23, 2015, Leon Roday resigned as Senior Vice President of the Company.
Genworth Life Insurance Company
11
3. Effective January 1, 2015, Matthew Keppler was elected as Senior Vice President and Chief Financial Officer of the Company. 4. Effective April 14, 2015, Kelly Groh was elected as Controller of the Company. 5. Effective October 15, 2015, Martin P. Klein resigned from his position with the Company.
In addition to the above officers, additional Vice Presidents, Assistant Vice Presidents
and other assistant officers were also appointed.
Numerous changes in directors and officers occurred during the period under review. As
required pursuant to 18 Del. C. §4919 “Change of directors, officers; notice”, proper notification
was provided to the Delaware Department of Insurance.
Articles of Incorporation and bylaws
The Company did not amend its Articles of Incorporation or bylaws during the exam
period.
Corporate Records
The recorded minutes of the sole stockholder and Board of Directors were reviewed for
the period under examination. The recorded minutes of the Board adequately documented its
meetings and approval of Company transactions and events, including the authorization of
investments as required by 18 Del. C. §1304 “Authorization; record of investments”.
The Company properly reported changes in directors and officers in compliance with 18
Del. C. §4919 “Change of directors, officers; notice”.
Holding Company System
The Company is a member of an insurance holding company system as defined under 18
Del. C. §5001. The former ultimate parent, which was named Genworth Financial, Inc. at the
time, completed an internal reorganization pursuant to a merger and established a new holding
company, which assumed the name Genworth Financial, Inc., and which became the ultimate
Genworth Life Insurance Company
12
parent of GLIC. The Company is a wholly owned subsidiary of GNA. GNA is a wholly owned
subsidiary of Genworth Holdings, which was the former Genworth Financial, Inc. prior to the
internal reorganization described above.
The following depicts an abbreviated organizational chart of the Company’s relationship
within the holding company system at December 31, 2014:
Genworth Life Insurance Company
13
65.5%
34.5%
River Lake Insurance Company X (VT)
River Lake Insurance Company VIII (VT)
Genworth Life Insurance Company of New York (NY)
Jamestown Life Insurance Company
(VA)
Genworth Financial, Inc. (DE)
Genworth Holdings, Inc. (DE)
Genworth North America Corporation (WA)
Genworth Life Insurance Company (DE)
Genworth Life and Annuity Insurance Company (VA)
River Lake Insurance
Company XI (DE)
Rivermont Life Insurance Company I (SC)
River Lake Insurance Company VI (DE)River Lake Insurance Company VII (VT)
River Lake Insurance Company IX (VT)
River Lake Insurance Company IV Limited (Bermuda)
River Lake Insurance Company (SC)River Lake Insurance Company II (SC)
Genworth Life Insurance Company
14
Affiliated Agreements
The following agreements were in effect between the Company and its affiliates at
December 31, 2014.
Management and Services Agreement
The Company, and Genworth Financial Agency, Inc. (“GFA”), are parties to the
Management and Services Agreement, as amended January 1, 1991, for allocation of common
costs for home office occupancy, expenses, administrative and marketing services.
The Company and Genworth Financial Mortgage Funding Corporation (“GNWFMF”)
are parties to a Loan Origination and Interim Servicing Agreement effective August 15, 1994.
Pursuant to this agreement, the Company provides mortgage investment and servicing services to
GNWFMF with respect to commercial mortgage loans originated by the Company.
The Company is party to a Policy Loan Servicing Agreement with special purpose
affiliates whereby the Company provides servicing and administration services for certain
policyholder loans acquired by the affiliate from the Company. The agreement with Genworth
Special Purpose One (“GNW One”) was effective December 3, 1999; the agreement with
Genworth Special Purpose Two (“GNW Two”) was effective June 22, 2001 and the agreement
with Genworth Special Purpose Three (“GNW Three”) was effective November 14, 2000.
The Company and National Eldercare Referral System, Inc. (also known as CareScout)
are parties to a Multipurpose Confidentiality Agreement effective August 1, 2003. This
agreement establishes that in providing the Company with certain services and/or products,
CareScout may receive individually identifiable information, which is subject to certain federal,
state and local statutes. CareScout agrees to protect such information under the terms of the
agreement.
Genworth Life Insurance Company
15
The Company and CareScout are parties to a Master Services Agreement effective April
1, 2005. This agreement establishes that CareScout will provide certain services and/or
deliverables to the Company as certain work orders describe.
The Company, GNA, its subsidiaries and various affiliates are parties to an Amended and
Restated Services and Shared Expense Agreement effective January 1, 2004. This agreement
provides for certain management and general services and the sharing of joint expenses by and
between such companies and such other affiliated companies who execute an Adoption
Agreement.
The Company and affiliates, GNA, GLAIC, GLICNY, and former affiliate Union
Fidelity Life Insurance Company (“UFLIC”) are parties to a Joint Management Committee
Agreement effective July 1, 2005. This agreement established an Annuity Joint Management
Committee and a Long Term Care Joint Management Committee to facilitate the efficient
administration of business reinsured under certain reinsurance agreements between the Genworth
ceding companies and UFLIC.
The Company, GLAIC, GLICNY and Genworth are parties to a Collection Agent
Services Agreement effective November 15, 2006. The agreement establishes that the Company,
GLAIC, GLICNY and Genworth would consolidate eight wire accounts for payments received
in connection with certain of their products into a single New York based account maintained by
GLICNY.
The Company entered into an Administrative Service Agreement among the Company,
GLAIC, GLICNY and GNA effective June 1, 2007. This agreement establishes that the
Company provides GLICNY with certain administrative and special services for day-to-day
operations of certain property, equipment and facilities.
Genworth Life Insurance Company
16
The Company and GLAIC are parties to a Novation and Contribution Agreement with
affiliates Brookfield Life Assurance Company Limited (“Brookfield”), Brookfield Life and
Annuity Insurance Company Limited (“BLAIC”) and Genworth whereby Brookfield’s
obligations under its existing reinsurance agreements with GLIC and GLAIC and agreements
ancillary thereto were novated to BLAIC effective August 1, 2011.
The Company and GLAIC are parties to separate Agency Contracts, dated September 11,
2011, with GFA whereby GFA distributed certain medicare supplemental insurance products
offered by each GLAIC and GLIC. In return, GFA received commissions paid by each GLAIC
and GLIC.
The Company and Genworth Financial India Private Limited (“GFIPL”) are parties to
separate Statements of Work, numbered SOW1, SOW 3 and SOW 4, effective November 1,
2013 whereby GFIPL provided technical production support, maintenance and off-shore
leadership to the Company’s third party suppliers.
Tax Agreements
Genworth and its insurance affiliates, including the Company, entered into a Tax
Allocation Agreement effective May 24, 2004. According to this agreement, the parties agreed
to a method of allocation of consolidated federal income tax liability resulting from the
consolidated federal income tax reporting of the parties. There is also a former Tax Allocation
Agreement in place whereby the parties agree to the method of allocation of consolidated federal
income tax liability resulting from the consolidated federal income tax reporting of the
registrants for tax periods ending before May 24, 2004. The Tax Allocation Agreement was also
amended for the method of allocation for tax periods commencing on or after January 1, 2011.
Genworth Life Insurance Company
17
All subsequently joining parties to this agreement have executed individual Tax Adoption
Agreements.
The Company, GLAIC and GNA are parties to an Assumption Agreement effective
September 28, 2000. This agreement established that GNA would assume the tax reserves on the
balance sheet of the Company. The agreement was amended and restated December 22, 2009,
whereby GNA agrees to establish, maintain, and pay tax reserves on the balance sheet and to pay
and discharge the Company of obligations in connection with tax reserves, not to exceed the
Aggregate Payment Limit of $20 million.
Genworth and the Company entered into a Tax Matters Agreement effective February 1,
2005 as a result of the Section 338 Election made by the Company following Genworth’s Initial
Public Offering on May 24, 2004. This agreement was amended on January 1, 2007 to amend
the formula for determining the amount of payments to ensure the Company is required to make
whenever it has a benefit not withstanding any consolidated loss for the Company’s life
insurance subsidiaries. Genworth and the Company and its subsidiaries entered into a Tax
Matters Agreement on September 15, 2005 which provides for the allocation of certain
additional tax benefits and burdens for periods following the initial public offering closing date
on May 24, 2004.
River Lake Insurance Company (“RLIC”), River Lake Insurance Company II (“RLIC
II”), Rivermont Insurance Company (“Rivermont”) and River Lake Insurance Company VII
(“RLIC VII”) (special purpose captive subsidiaries of GLAIC) executed Special Tax Agreements
upon formation with the Company and GLAIC. The Special Tax Agreements provide that any
tax benefits realized by GLIC in relation to the aforementioned entities would be assigned to
GLAIC. The effective dates differ by each corresponding captive formation.
Genworth Life Insurance Company
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RLIC, RLIC II and Rivermont entered into Amended and Restated Special Tax
Agreements with the Company and GLAIC effective August 6, 2009. RLIC VII entered into
Amended and Restated Special Tax Agreements with the Company and GLAIC effective
December 1, 2010. These agreements established that to the extent that the entity produced a net
operating loss in a period (where such losses are created solely by business ceded by GLAIC to
the River Lake entity), benefits shall be paid to that specific entity subsequent to 2008. Thus,
any tax benefits for 2009 forward will be paid to the special purpose captives. Tax benefits for
periods prior to 2008 would continue to reside with GLAIC (through assignment by GLIC) as
agreed.
TERRITORY AND PLAN OF OPERATION
Territory
As of December 31, 2014, the Company was licensed to transact business in the District
of Columbia, as well as all states except New York. The Company is also licensed to transact
business in Puerto Rico and the U.S. Virgin Islands.
The Company is authorized as a stock insurer to transact the business of life and health
insurance as defined in 18 Del. C. §902 "Life insurance" and 18 Del. C. §903 "Health insurance".
The principal office facilities of the Company are located in Richmond, Virginia.
Plan of Operation
The geographical breakdown of direct written premiums as of December 31, 2014 was:
California, $391,382,122 (11.56%); Florida, $213,320,825 (6.30%); Texas, $209,366,674
(6.18%); New Jersey, $169,462,183 (5.01%) and other jurisdictions, $2,401,622,567 (70.95%).
The Company is one of a number of subsidiaries of Genworth, a leading financial
security company that provides insurance, investment and financial solutions. In 2011, the
Genworth Life Insurance Company
19
Company changed its operating business segments to better align its businesses. Under the new
structure, the Company operates through two segments: U.S. Life Insurance and Runoff. The
Company also has Corporate and Other Activities which include income and expenses not
allocated to the segments.
U.S. Life Insurance
The Company’s principal products in the U.S. Life Insurance segment are long-term care
insurance (“LTC”), universal life insurance, term life insurance and fixed deferred and
immediate annuities for the retirement market.
Long-Term Care Insurance
Individual and group long-term care insurance products provide defined levels of
protection against the significant and escalating costs of long-term care services provided in the
insured’s home or assisted living or nursing facilities.
The Company distributes their long-term care insurance products through diversified
sales channels consisting of appointed independent producers, financial intermediaries and
dedicated sales specialists. They have made significant investments in their servicing and
support for both independent and dedicated sales specialists.
Life Insurance
Life insurance products provide protection against financial hardship after the death of an
insured. Some of these products also offer a savings element that can help accumulate funds to
meet future financial needs. The Company’s life insurance offerings were universal life
insurance in the form of indexed universal life and linked-benefits product, combining a
universal life insurance contract with a long-term care insurance rider, and term life insurance.
Genworth Life Insurance Company
20
The Company’s universal life insurance products are designed to provide permanent
protection for the life of the insured. In addition, the Company also offers linked-benefit riders
for all of its current indexed universal life products for customers who have traditionally self-
funded long-term care risk or sought multiple benefits.
The Company’s term life insurance products provide coverage with guaranteed level
premiums for a specified period of time and generally have little or no buildup of cash value.
The Company also has in-force blocks of term universal life and whole life insurance; however,
it no longer solicits sales of these products.
The Company offered life insurance products through an extensive network of
independent brokerage general agencies throughout the United States and through financial
intermediaries and insurance marketing organizations.
Fixed Annuities
The Company offered fixed single premium deferred annuities which require a single
premium payment at time of issue and provide an accumulation period and an annuity payout
period. The annuity payout period in these products may be either a defined number of years,
the annuitant’s lifetime or the longer of a defined number of years or the annuitant’s lifetime.
During the accumulation period, the Company credits the account value of the annuity
with interest earned at a crediting rate guaranteed for no less than one year at issue, but which
may be guaranteed for up to seven years, and thereafter is subject to annual crediting rate resets
at its discretion. The crediting rate is based upon many factors including prevailing market rates,
spreads and targeted returns, subject to statutory and contractual minimums.
The majority of the Company’s fixed single premium deferred annuity contract holders
retain their contracts for five to ten years. The Company also offered single premium immediate
Genworth Life Insurance Company
21
annuities which provide a fixed amount of income for either a defined number of years, the
annuitant’s lifetime or the longer of a defined number of years or the annuitant’s lifetime in
exchange for a single premium.
The Company distributed their fixed annuity products through BGAs, independent
broker/dealers and select banks and national brokerage and financial firms. However, the
Company no longer solicits sales of these products.
Runoff
The runoff segment includes the results of non-strategic products which are no longer
actively sold. The Company’s non-strategic products primarily include institutional and
corporate-owned life insurance products.
The Company no longer offers retail and group variable annuities, but continues to
service the existing block of business. The Company also no longer offers variable life insurance
policies, but continues to service existing policies.
Institutional
Institutional products consist of funding agreement backed notes and guaranteed
investment contracts, which are deposit-type products that pay a guaranteed return to the contract
holder on specified dates. The Company explores periodic issuance of its institutional products
for asset-liability management purposes.
Corporate-Owned Life Insurance
The Company no longer offers its corporate-owned life insurance product; however, it
continues to manage its existing block of business.
Genworth Life Insurance Company
22
Operations and Technology
In the Company’s U.S. Life Insurance segment, they interact directly with their
independent sales intermediaries and dedicated sales specialists through secure websites that
have enabled them to transact business with them electronically.
A.M. Best Rating
A.M. Best affirmed the Company’s ratings at “A” (Excellent) with stable outlook on
November 6, 2014. However, on December 18, 2014, A.M. Best placed the Genworth life
insurance subsidiaries under review with negative implications. On February 13, 2015,
following the Company’s earnings announcement for the fourth quarter of 2014, A.M. Best
announced its downgrade of the Company’s rating from “A” (Excellent) to “A-“ (Excellent). On
May 1, 2015, A.M. Best placed its ratings of the Company under review with developing
implications.
A.M. Best states that the “A-“ (Excellent) rating is assigned to those companies that have,
in its opinion, an excellent ability to meet their ongoing insurance obligations. The “A-“
(Excellent) rating is the fourth-highest of 15 ratings assigned by A.M. Best, which range from
“A++” to “F.”
On February 9, 2016, A.M. Best downgraded the Company’s financial strength rating to
“B++” (Good) from “A-“ (Excellent) with a negative outlook. The rating downgrades reflect the
uncertainty and material execution risk of obtaining the required regulatory approvals associated
with Genworth’s recent strategic announcement during its fourth quarter 2015 earnings
presentation in February 2016. A.M. Best notes that, in addition to the announcement, Genworth
reported a material reserve charge associated with its universal life business, which drove an
operating loss in the U.S. Life Insurance segment on a GAAP basis during the quarter.
Genworth Life Insurance Company
23
Genworth’s year-end 2015 operating results continue to reflect varying degrees of volatility and
macroeconomic pressures occurring in many of its business segments, including its mortgage
insurance operations.
REINSURANCE
During 2014, the Company participated in both assumed and ceded reinsurance programs
with affiliates and non-affiliates. As of December 31, 2014, reinsurance assumed totaled
$399,815,054 or 11.5% of the Company’s direct written premiums of $3,473,416,090.
Reinsurance ceded totaled $2,168,120,235 or 62.3% of the Company’s direct premiums. In
2014, the Company reported $587,667,415 in reinsurance assets and $10,156,979,470 in
reinsurance liabilities.
The following is a summary of significant reinsurance contracts in place as of December
31, 2014:
Life Insurance and Annuities
Assumed from Affiliates
Effective April 1, 2013, River Lake Insurance Company X (“RLIC X”) entered into a
coinsurance with funds withheld reinsurance agreement with GLAIC to assume certain level
term life policies issued on or after October 1, 2012. Concurrently, the Company entered into a
monthly renewable term ( M RT) reinsurance agreement with RLIC X ("RLX MRT Treaty")
to assume 100% of the mortality risk on the policies written by GLAIC and coinsured to RLIC
X. Effective June 20, 2014, the coinsurance agreement between GLAIC and RLIC X was
amended and restated to add new business written in 2009 and 2010. Concurrently, the
Company assumed 100% of this business on a MRT basis. The amount in-force at
Genworth Life Insurance Company
24
December 31, 2014 associated with this treaty was $31,468,260,146. Reserves
assumed as of December 31, 2014 and 2013 were $4,491,230 and $807,175, respectively.
Effective November 1, 2013, GLAIC recaptured previously ceded term life business
from RLIC VI. In connection with the recapture, RLIC VI paid GLAIC the terminal payment
of $68,181,725. Concurrently, GLAIC entered into a new coinsurance with funds withheld
reinsurance agreement with RLIC VI to cede effectively the same term life business that had
been previously recaptured from RLIC VI. RLIC VI simultaneously entered into a MRT
reinsurance agreement (“RLVI MRT Treaty”) with the Company to retrocede the mortality risk
on the policies written by GLAIC and GLICNY which were coinsured to RLIC VI by
GLAIC. The RLVI MRT Treaty excluded those policies which were written by the Company.
The amount In-Force at December 31, 2014 associated with this treaty was $20,694,495,938.
Reserves assumed as of December 31, 2014 and 2013 were $3,924,353 and $3,714,444
respectively.
Other significant assumed treaties to affiliates included a Co-insurance treaty effective
January 1, 2000 whereby the Company assumed term life business from GLAIC. At December
31, 2014, the amount in-force associated with this treaty amounted to $47,733,988,365 and the
Company reported reserves in the amount of $435,749,187. Also, the Company assumed
business from GLICNY thru two Yearly Renewable Term (“YRT”) treaties and a co-insurance
with funds withheld treaty which amounted to $2,215,034,618 in-force and $63,221,739 in
reserves.
Genworth Life Insurance Company
25
Assumed from Non-Affiliates
The Company reported only one non-affiliated assumed treaty which was with Fidelity
Investments Life Insurance Company. Effective October 1, 2001, the Company reported $0
amount in-force and $648,271,831 in reserves as of December 31, 2014.
Ceded to Affiliates
The Company is a party to a modified coinsurance (Modco) treaty with BLAIC,
whereby the Company cedes 40% of certain fixed deferred annuity premiums. Modco reserves
as of December 31, 2014 and 2013 totaled $1,168,511,617 and $1,345,312, 100, respectively.
No other forms of collateral for this treaty are used by the Company to take reserve credit.
Effective October 1, 2013, the Company entered into a reinsurance agreement with
GLAIC to cede SPDA business on a Modco basis. As a result of this transaction, the Company
received $3,200,000 as initial ceding commission from GLAIC. Ceded Modco reserves as of
December 31, 2014 and 2013 were $359,971,250 and $408,855,288 respectively.
Effective April 1, 2011, the Company amended and restated its existing universal life
treaty with GLAIC to cede certain Total Living Coverage ("TLC") policies to GLAIC and
modified certain other terms. Reserves ceded as of December 31, 2014 and 2013 were
$1,132,195,904 and $919,556, 175, respectively.
Ceded to Non-Affiliates
On April 15, 2004, the Company entered into two reinsurance agreements with
UFLIC pursuant to which it ceded effective as of January 1, 2004, its structured settlement
block of business and a block of LTC assumed from MetLife in 2000. Ceded reinsurance
reserves to UFLIC for the structured settlements block of business as of December 31, 2014
and 2013 were $4,097,428,076 and $4,176,280,570, respectively, and ceded reinsurance
Genworth Life Insurance Company
26
reserves for the LTC block of business as of December 31, 2014 and 2013 were
$3,831,444,628 and $3,592,827,372, respectively. To secure the payment of its obligations to
the Company under the reinsurance agreements governing the reinsurance transactions, UFLIC
has established trust accounts to maintain an aggregate amount of assets with a statutory book
value at least equal to the statutory general account reserves attributable to the reinsured
business less an amount to be held in certain claims paying accounts. A trustee administers
the trust accounts and the Company is permitted to withdraw from the trust accounts amounts
due to the Company pursuant to terms of the reinsurance agreements that are not otherwise paid
by UFLIC.
Effective June 30, 2009, the Company entered into a new Modco and coinsurance
reinsurance agreement with Hannover Life Reassurance Company of America (“Hannover”)
to cede certain Single Premium Deferred Annui ty (“SPDA”) policies issued in 2005
and later. Effective September 30, 2013, the Company recaptured all of the SPDA contracts
previously ceded to Hannover. The Company recaptured Modco reserves of $1,327,545,352 and
recorded a pre-tax gain of $47, 149,775.
Effective October 1, 2013, the Company recaptured term life business previously
ceded to Hannover. As a result of this transaction, $199,004,648 of reserves were recaptured.
Effective December 31, 2013, the Company entered into a new reinsurance agreement with
SCOR Global Life Americas Reinsurance Company (“SCOR”) to cede the business recaptured
from Hannover to SCOR. Reserve credit taken for this cession as of December 31, 2014 and
2013 was $211,335,607 and $200,233,375, respectively.
Genworth Life Insurance Company
27
Accident and Health Insurance
Assumed from Affiliates:
The Company assumes LTC risk from GLAIC, subject to the Coinsurance Agreement
effective October 1, 1998. As of December 31, 2014, assumed reinsurance reserves from
GLAIC were $ $107,701,417 and assumed premiums were $5,814,669.
Assumed from Non-Affiliates
The Company’s major assumed treaty is with MetLife Insurance Company, USA.
Effective July 1, 2000, it is discussed above in the Non-Affiliates section. Other significant
assumed treaties are with Riversource Life Insurance Company. Under these coinsurance
agreements (one group and one individual), the Company assumed $102,481,369 in premiums in
2014 and reported reserves in the amount of $1,986,969,692. In addition, the Company has other
various reinsurance agreements with direct writers, under which it assumes LTC risks. All of
these treaties are closed to new business.
Ceded to Affiliates
The Company is a party to a funds withheld coinsurance treaty with BLAIC, whereby the
Company cedes 50% of its LTC business to BLAIC. Statutory reserves ceded to BLAIC as of
December 31, 2014 and 2013 were $9,468,500,371 and $8,462,473,020, respectively. The
collateral supporting the reserve credit taken by the Company as of December 31, 2014 and
2013 includes Funds Withheld of $9,602,927,400 and $8,576,575,445, respectively. In addition,
BLAIC has established a trust for the benefit of the Company.
Ceded to Non-Affiliates
The Company reported various reinsurance ceded treaties to non-affiliates in 2014. The
most significant reinsurer was RGA Reinsurance Company (“RGA”), which was party to seven
Genworth Life Insurance Company
28
treaties, pursuant to which RGA assumed LTCI risks from the Company. Premiums associated
with these treaties amounted to $215,115,695 and $258,949,393 in reserve credits taken by the
Company.
Effective December 17, 2012, the Company executed recapture agreements related to
certain reinsurance treaties with RGA, whereby certain LTC policies were ceded to RGA, then
retroceded back to the Company. The recapture resulted in a statutory gain of $529,751,624,
of which 50% was ceded to BLAIC under a separate reinsurance agreement. Reserves ceded
under these agreements with RGA as of December 31, 2013 amounted to $182,992,314. Effective
January 1, 2014, the Company entered into coinsurance agreements with RGA to cede 20% of
certain LTC policies issued on or after April 1, 2013. In conjunction with this agreement,
the Company and RGA amended certain prior reinsurance agreements to provide for a
security trust agreement for such agreements and entered into such security trust agreement
and an additional security trust agreement which related to the policies ceded under the 2014
coinsurance agreement. Reserves ceded under the agreements with RGA as of December 31,
2014 were $307,095,044.
FINANCIAL STATEMENTS
Financial statements, as reported and filed by the Company with the State Department of
Insurance, are reflected in the following:
o Statement of assets, liabilities and surplus o Statement of operations o Supporting schedules and exhibits to the extent needed o Reconciliation of surplus for the period since the last examination
Genworth Life Insurance Company
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Statement of Assets, Liabilities and Surplus As of December 31, 2014
Nonadmitted Admitted
Assets Assets Assets Notes
Bonds 27,357,292,774$ 120,160$ 27,357,172,614$ Stocks: Preferred stocks 126,949,075 126,949,075 Common stocks 2,485,482,373 19,234 2,485,463,139 Mortgage loans on real estate First liens 3,600,775,965 3,600,775,965 Cash, cash equivalents and short-term investments 1,122,190,820 1,122,190,820 Contract loans 972,676,306 2,458,063 970,218,243 Derivatives 452,183,899 452,183,899 Other invested assets 411,105,087 8,142,630 402,962,457 Receivables for securities 2,095,388 350,611 1,744,777 Securities lending reinvested collateral assets 166,765,269 166,765,269 Investment income due and accrued 391,473,658 391,473,658 Premiums and considerations Uncollected premiums and agents' balances in course of collection 58,397,174 12,171,924 46,225,250 Deferred premiums, agents' balances and installments booked but 125,211,777 594,337 124,617,440 Reinsurance: Amounts recoverable from reinsurers 239,515,312 4,855 239,510,457 Funds held by or deposited with reinsured companies 48,881,242 48,881,242 Other amounts receivable under reinsurance contracts 302,219,382 2,943,666 299,275,716 Net deferred tax asset 243,418,960 243,418,960 Guarantee funds receivable or on deposit 14,480,839 14,480,839 Electronic data processing equipment and software 58,644,732 53,162,741 5,481,991 Furniture and equipment, including health care delivery assets 660,844 660,844 0Receivable from parent, subsidiairies and affiliates 4,608,752 4,608,752 Aggregate write-ins for other than invested assets 56,821,137 12,860,728 43,960,409 Total assets excluding Separate Accounts 38,241,850,765$ 93,489,793$ 38,148,360,972$ From Separate Accounts 14,854,465 14,854,465 Total Assets 38,256,705,230$ 93,489,793$ 38,163,215,437$
Genworth Life Insurance Company
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Liabilities, Surplus and Other FundsNotes
Aggregate reserves for life contracts 11,675,642,290$ 1
Aggregate reserves for accident and health contracts 9,473,618,757 2, 4Liability for deposit type contracts 860,728,336 3Contract claims: Life 13,160,521 Accident and health 58,345,500 Premiums and annuity considerations for life and accident and health contracts received in advance 35,324,033 Contract liabilities not included elsewhere: Other amounts payable on reinsurance 554,052,070 Interest maintenance reserve 782,085,401 Commissions to agents due or accrued 9,491,766 Commissions and expense allowances payable on reinsurance assumed 1,081,305 General expenses due or accrued 129,523,433 Transfers to Separate Accounts due or accrued (2,480,277) Taxes, licenses and fees 19,552,231 Current federal and foreign income taxes 106,143,043 Unearned investment income 762 Amounts withheld or retained by company as agent or trustee 21,244,671 Remittances and items not allocated 25,957,704 Miscellaneous liabilities: Asset valuation reserve 174,670,561 Funds held under reinsurance treaties and unauthorized reinsurers 9,602,927,400 Payable to parent, subsidiaires and affiliates 13,775,582 Derivatives 219,774,495 Payable for securities 1,654,517 Payable for securities lending 179,471,650 Aggregate write-ins for liabilities 968,255,770 Total liabilities excluding Separate Accounts 34,924,001,521$ From Separate Accounts Statement 14,854,465 Total Liabilities 34,938,855,986$
Common capital stock 4,561,258 Preferred capital stock 300,000 Gross paid-in and contributed surplus 3,125,742,875 Unassigned funds 155,038,119 Less treasury stock, at cost: shares common 61,282,801 Capital and Surplus 3,224,359,451$ Total Liabilities, Capital and Surplus 38,163,215,437$
Genworth Life Insurance Company
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Summary of Operations As of December 31, 2014
Premiums and annuity considerations for life and accident and health contracts 1,713,305,278$ Consideration for supplementary contracts with life contingencies 25,940,804 Net investment income 1,816,616,458 Amortization of Interest Maintenance Reserve 55,955,411 Commissions and expense allowances on reinsurance ceded 472,948,243 Reserve adjustments on reinsurance ceded (298,207,855) Miscellaneous income: Income from fees associated with investment management, administration and contract guarantees from Separate Accounts 83,118 Charges and fees for deposit-type contracts 195 Aggregate write-ins for miscellaneous income 1,779,891 Totals 3,788,421,543$
Death benefits 80,905,285$ Annuity benefits 429,933,209 Disability benefits and benefits under accident and health contracts 689,573,934 Surrender benefits and withdrawals for life contracts 469,146,620 Interest and adjustments on contract or deposit-type contract funds 30,792,816 Payments on supplementary contracts with life contingencies 27,157,855 Increase in aggregate reserves for life and accident and health contracts 835,338,368 Totals 2,562,848,087$
Commissions on premiums, annuity considerations and deposit-type contracts funds 325,935,095 Commissions and expense allowances on reinsurance assumed 47,203,544 General insurance expenses 345,922,479 Insurance taxes, licenses and fees, excluding federal income taxes 69,576,261 Increase in loading on deferred and uncollected premiums (643,120) Net transfers to or (from) Separate Accounts net of reinsurance (1,317,588) Aggregate write-ins for deductions 512,290,323 Totals 3,861,815,081$
Net gain from operations before dividends to policyholders and federal income taxes (73,393,538)$ Dividend to policyholders - Net gain from operations after dividends to policyholders and before federal income taxes (73,393,538) Federal and foreign income taxes incurred 89,400,396 Net gain from operations after dividends to policyholders and federal income taxes and before realized capital gains (losses) (162,793,934) Net realized capital gains (losses) (16,932,945) Net Income (179,726,879)$
Genworth Life Insurance Company
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Reconciliation of Capital and Surplus From December 31, 2009 to December 31, 2014
Capital and Surplus, December 31, 2009 3,164,849,535$
Net income 236,582,434
Additions:Change in net unrealized capital gains (losses) 216,075,204 Change in net deferred income tax 187,956,277 Change in liability for reinsurance in unauthorized companies 29,475,920 Change in reserve on account of change in valuation basis 14,111,696 Surplus adjustment: Paid in 37,575,125
485,194,222 Deductions
Change in net unrealized foreign exchange capital gain (loss) (5,707,242) Change in non-admitted assets (798,094) Change in asset valuation reserve (145,745,445) Surplus adjustment: Change in surplus as a result of reinsurance (40,283,102) Dividends to stockholders (425,000,000) Aggregate write-ins for gains and losses in surplus (44,732,857)
Total Deductions (662,266,740)
Capital and Surplus, December 31, 2014 3,224,359,451$
Analysis of Changes in the Financial Statements Resulting from Examination
There were no financial adjustments to the Company’s financial statements as a result of
this examination.
NOTES TO FINANCIAL STATEMENTS
The Delaware Department of Insurance retained the services of the consulting actuarial
firm INS Consultants, Inc. (INS) for the purposes of conducting an independent review of the
Company’s aggregate reserves for Life, Accident & Health, and Deposit contracts. Based on
their independent analysis and their review of supporting reports, including the 2014 Actuarial
Opinion Memorandum (AOM), the 2014 reserve analysis of KPMG, LLP, and Company
Genworth Life Insurance Company
33
provided valuation files, work papers, contracts, policy data and loss data, Company reserves
were accepted. Pertinent supporting data contained in Company sampled policy and loss files
was reviewed and substantiated during the examination without material exception.
(Note 1) Aggregate reserves for life contracts $11,675,642,290
This liability is reported on Page 3, Line 1 and in Exhibit 5 of GLIC’s December 31,
2014 General Account (GA) Annual Statement. The reserve breakdown in Exhibit 5, by reserve
segment is a follows (differences due to rounding)
Reserve Segment Total Gross Reinsurance Ceded Total (Net)
Life Insurance 5,339,429,674$ 3,393,580,376$ 1,945,849,298$ Annuities 12,983,038,690 3,512,593,785 9,470,444,905 Supplementary Contracts 155,252,287 7,182 155,245,105 Accidental Death Benefits 13,140 1,236 11,904 Disability - Active Lives 16,045,778 2,970,255 13,075,523 Disability - Disabled Lives 5,088,305 638,816 4,449,489
Miscellaneous Reserves 135,886,380 49,320,318 86,566,062
Totals (Net) 18,634,754,254$ 6,959,111,968$ 11,675,642,286$
(Note 2) Aggregate reserve for accident and health contracts $9,473,618,757
This liability is reported on Page 3, Line 2 and in Exhibit 6 of GLIC’s December 31,
2014 General Account (GA) Annual Statement. The reserve breakdown is as follows
(differences due to rounding)
Genworth Life Insurance Company
34
Active Life ReserveUnearned Premium reserves 520,739,255$ Additional Contract Reserves 17,463,038,366
Additional Actuarial Reserves - Asset/Liability Analysis 570,000,000
Total (Gross) 18,553,777,621
Reinsurance ceded 11,020,699,295
Total (Net) 7,533,078,326$
Claim ReservePresent value of amounts not yet due 5,316,246,056$
Reinsurance ceded 3,375,705,625
Total (Net) 1,940,540,431$
Grand Total (Net) 9,473,618,757$
(Note 3) Liability for deposit type contracts $860,728,336
This liability is reported on Page 3, Line 3 and in Exhibit 7 of GLIC’s December 31,
2014 General Account (GA) Annual Statement. The reserve breakdown is as follows
(differences due to rounding)
Liability Item Total Gross Reinsurance Ceded Total (Net)
Guaranteed Interest Contracts 183,520,279$ -0-$ 183,520,279$ Annuities Certain 1,043,386,258 570,002,376 473,383,882 Supplemental Contracts 204,073,408 249,233 203,824,175
Totals (Net) 1,430,979,945$ 570,251,609$ 860,728,336$
(Note 4) MetLife/UFLIC Trust Issues
The Delaware Department of Insurance conducted a review of the reserves of GLIC, as
of December 31, 2014. This review included an examination of the asset adequacy analysis in
accordance with Delaware Administrative Code 305 (Actuarial Opinion and Memorandum
Genworth Life Insurance Company
35
Regulation). During the review, the Department learned that GLIC was using assets held in trust
for the benefit of Met Life Insurance Company USA (“MetLife") in the asset adequacy analysis
covering other lines of business.
In further review of this issue, it was noted that GLIC is a party to two related
coinsurance agreements which, when taken together, transfers all of the policy risk associated
with certain LTC policies originally issued by Travelers Insurance Company (“Travelers”) and
subsequently purchased by MetLife. In 2000, Travelers ceded the business to GLIC (then known
as General Electric Capital Assurance Company) via a 90% coinsurance treaty which was
subsequently amended to 100%. This reinsurance arrangement is supported by a trust held by
GLIC for the benefit of MetLife (the GLIC trust). In preparation of Genworth's IPO in 2004,
GLIC retroceded the MetLife LTC policies to UFLIC, a nonaffiliated insurer. This 100%
indemnity retrocession agreement is supported by a second, separate trust held by UFLIC for the
benefit of GLIC (the UFLIC trust). UFLIC now owns all of the assets and reserves associated
with this business. Thus, there are two trusts representing two sets of assets that are earmarked
for this one block of LTC business. Since the trusts each have the same requirement to hold
assets at least equal to of the reserves it appears that there is a double funding of trust assets
related to the MetLife LTC reinsurance transactions in the Asset Adequacy Testing (AAT). On
this basis, GLIC’s appointed actuary concluded that it is appropriate to use the assets held in the
GLIC trust for purposes of the AAT for GLIC’s non-MetLife’s LTC liabilities.
However, such treatment could be viewed as an improper use of certain trust assets
associated with the MetLife LTC policies in the AAT performed by GLIC since the assets in the
initial trust are used for non-MetLife LTC policies.
Genworth Life Insurance Company
36
The Delaware Department of Insurance is continuing to discuss the reinsurance trust
issue with GLIC as the Company continues its efforts with the associated parties to resolve this
issue.
SUBSEQUENT EVENTS
On January 28, 2016, the Company entered into two funding agreements with the Federal
Home Loan Bank Pittsburgh for $75,000,000 each; the first of which matures in 2018 and the
other in 2019.
On February 4, 2016, the Company announced its decision to suspend sales of its
traditional life insurance and fixed annuity products in the first half of 2016 given the continued
impact of ratings and recent sales levels of these products.
On February 4, 2016, the Company announced a plan to restructure the U.S. life
insurance business to separate and isolate its LTC business. GLIC intends, through a series of
reinsurance restructuring transactions, to separate its LTC business into one subsidiary and then
ultimately isolate this business from the bondholders of Genworth Holdings. These actions are
expected to be part of a multi-phased process that includes, among other things, the repatriation
of all business from BLAIC, one of GLIC’s Bermuda domiciled reinsurance affiliates. These
proposed actions will require regulatory approval from several different regulatory jurisdictions,
and may require other third-party approvals. GLIC expects to complete these actions over the
next 12 to 18 months.
SUMMARY OF RECOMMENDATIONS
Compliance With Prior Exam Recommendations
There were no recommendations in the prior examination report.
Genworth Life Insurance Company
37
Current Exam Recommendations
There were no recommendations as a result of this examination.
CONCLUSION
The following schedule shows the results of this examination and the results of the prior
examination with changes between the examination periods:
Description December 31, 2009 December 31, 2014 (Decrease)
Assets 32,974,557,530$ 38,163,215,437$ (5,188,657,907)$
Liabilities 29,809,707,995$ 34,938,855,986$ (5,129,147,991)$
Common capital stock 4,561,258 4,561,258 -0- Preferred capital stock 300,000 300,000 -0- Gross paid in and contributed surplus 3,088,167,750 3,125,742,875 (37,575,125) Unassigned funds (surplus) 133,103,328 155,038,119 (21,934,791) Less treasury stock, at cost: shares common (61,282,801) (61,282,801) -0- Total Capital and Surplus 3,164,849,535 3,224,359,451 (59,509,916)
Total Liabilities, Capital and Surplus 32,974,557,530$ 38,163,215,437$ (5,188,657,907)$
The assistance of Delaware’s consulting actuarial firm, INS Consultants, Inc., as well as
the IT assistance of INS Services, Inc., is acknowledged.
Respectfully submitted,
Douglas Bey, CFE
Examiner-In-Charge State of Delaware